“We're doing this because our agents have really asked us to,” said Jim Ruel, senior vice president of Hartford Select Business, the small business division of The Hartford.

He explained that Hartford responded by setting up a new small business unit devoted to the upper end of the small business market called Select Customer Xpand earlier this year, specifically, to give agents an easy and profitable way to write business that falls between the traditional small commercial and middle market segments.

“In some ways, it's kind of an inflationary need,” he said, noting that agents and The Hartford have witnessed their small businesses clients growing growing into bigger spaces in buildings and adding more employees.

Traditionally, The Hartford had defined the small business customer, handled by its Select Business unit, as a customer with $5 million in sales or less, or with $5 million in property values or less. “Now, with Select Customer Xpand, we're raising that up to $15 million in sales and property values,” Mr. Ruel said.

Mr. Ruel referred to Hartford's operating model for this bigger small business as a “hybrid” approach that gets it done efficiently, while at the same time protecting underwriting integrity.

“We sat down with many agents and soul-searched what their needs were,” he said. For their bigger customers, Mr. Ruel noted, agents said they needed:

A BOP-type solutionan easy composite-rated business owner's policy to give their customers a full breadth of coverages, and to give the agents a way to effectively tailor packages to specific business needs.

An easy submission process.

An insurer with a clearly defined and readily accessible appetite for this market segment.

Fast responses.

Mr. Ruel said the Hartford responded to the first need the product need with a policy that is similar to its Spectrum BOP product for traditional customers. Spectrum Xpand, for the larger small-business customers, starts with a base business owner's product that provides “the core coverages any customer would need,” he said.

With “specialized stretch endorsements,” the agent can tailor the core product with optional added coverages or additional limits that “meet the needs of the specific kinds of businesses that our agents' customers are in,” Mr. Ruel said.

Giving an example, Mr. Ruel explained that a lawyer's office might have different needs for valuable papers coverage than other similarly sized businesses.

“Specialized stretch endorsements,” which bundle increased base and optional coverages together for specific industries, are available for broadcasters, building owners, business services, communications and media, special trade contractors, international, janitorial services, law offices, manufacturers, metal manufacturers, publishers, printers, retailers, technology, and wholesalers.

Mr. Ruel noted that policy customization can be accomplished efficiently through an electronic submission system. “When a certain kind of business pops up on our system, the optional coverages we suggest are shown at the same time,” he said.

The electronic submission system, like the one that's been available for smaller small businesses, allows agents to submit business right from their offices, to get quotes and then to issue policies.

In addition, Hartford has built a special sales guide that specifically defines the organization's underwriting appetite into the submission system. “So, right as they submit the business, warnings and edits tell them what we like, what we don't like, and whether or not they need to talk to an underwriter about it,” Mr. Ruel said.

The sales guide, which is also available on Hartford's small business Web site, “gets [agents] to the right class of business, gives a description of the class [and lists] underwriting questions associated with the class. It eliminates confusion,” he said, stressing that when the company is transparent about its appetite, agents aren't forced to waste their time.

Mr. Ruel also noted that fast insurer responses for this type of business aren't simply a function of technology, highlighting the presence of a dedicated team of underwriting specialists as a key component of the Spectrum Xpand operation.

Without a dedicated underwriting unit fully devoted to the high-end small business segment, such business typically would be handled in the middle market operations of an insurance company. The business would sit on the bottom of the submission pile because of its low value in comparison to the rest of the middle market segment, he explained.

Still, the business can't be handled quite as automatically as a low-end small business risk, he said. “It is a little bit more underwriting intensive,” he said, explaining why a team of underwriters with specific expertise in working with business of this size was needed to complete Hartford's formalized approach to this market segment.

He noted that agents become frustrated when carriers move in and out of markets. “From a stability and consistency standpoint, we want to be there for the long haul,” he said, distinguishing Hartford's approach to the high-end small business market from carriers who write this segment in the same fashion as other small business risks responding quickly, but perhaps not with the underwriting attention that the higher-end risks deserve.

Highlighting one aspect of the BOP policy for higher-end small business risks that is different from policies for low-end businesses, he said that while the Spectrum policy for smaller risks uses a blended (composite) rate for property and liability, a split rate approach is used for Specturm Xpand (with separate rates for the property and liability components of the policy).

This approach “helps us price to exposure better, and it helps us really shape our pricing in a meaningful way for our customers [so that] they're not overpaying or underpaying,” he said.

Mr. Ruel wasn't willing to share any specific volume targets that Hartford has for this segment. He did note, however, that for low-end small businesses (with $5 million in sales or less), Hartford writes about a $1.9 billion share of a $34 billion market. The high-end small business segment, he said, is $22 billion market.

“It has a similar mix of businesses in terms of businesses that we would target as the low end does. And also, we're going to be able to write it with the same agents,” he said, predicting rapid growth.

Hartford described its appetite for the higher-end small business risks as “broad” and encompassing more than 500 eligible classes. “We shy away from transportation business and heavy construction and some restaurants,” Mr. Ruel said, identifying the few classes that fall outside of Hartford's appetite.

“We try to partner with our agents such that if they write a lot of target business with us, we can write more limited appetite business with them,” he added.

Beyond that, throughout the small business segmentfrom the low end to the high endhe said, Hartford tries to deliver product solutions to agents “that they can't easily get on the street today,” pointing to coverages such as equipment breakdown and employment practices liability, which are built into the business owner's packages.

He also said that with 20 years of experience in developing small business policies, technology and customer service centers, Hartford has recognized the importance of giving local support to its agents. “There's got to be a lot of communication, a lot of interactionand we think we have all the players in the right places to make that happen in the most efficient way,” he said, noting that local representatives don't just answer agents' questions about Hartford's appetite, but help them through technology issues as well.

Reproduced from National Underwriter Edition, June 11, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.